Volkswagen, Europe's largest car-maker, today decided it would spend up to $1bn (£500m) on a new plant in the US.

The German group said the new plant at Chattanooga, Tennessee, would initially produce 150,000 cars a year and employ 2,000 people directly.

Its announcement came barely hours after General Motors, still the world's biggest car-maker, said it would slash its white-collar staff by 20% in an effort to save $15bn in costs.

It also coincided with the jump in the value of the euro to a record new high of $1.60, putting new pressure on European exporters. BMW, the premium car-maker, is expanding output at its US plant at Spartanburg, South Carolina, by a half to offset the crippling effect of the euro.

Martin Winterkorn, VW's chief executive, has set a goal of overtaking both GM and Toyota to make his group the world's dominant car-maker and said it would be selling 800,000 cars in the US by 2018.

"The US market is an important part of our volume strategy and we are now resolutely accessing that market. Volkswagen will be extremely active there," he said.

VW, which also has a plant in Mexico and examined 25 potential sites in the US, said the new American plant would help to permanently alleviate exchange-rate fluctuations. "This, along with our growth strategy, is a prerequisite for the economic success of the company in the dollar region," Winterkorn said.

The Chattanooga plant will assemble a new mid-sized saloon tailored for the US market where consumers have been deserting big gas-guzzling SUVs in favour of more fuel-efficient cars.